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Measuring the managerial benefits of tax compliance: a fresh approach


Lignier, PAL, Measuring the managerial benefits of tax compliance: a fresh approach, Australian Tax Forum: A Journal of Taxation Policy, Law and Reform, 24, (2) pp. 117-150. ISSN 0812-695X (2009) [Refereed Article]

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Copyright 2009 Taxation Institute of Australia

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Managerial benefits of tax compliance have been identified by many authors in the tax compliance costs literature; they have however often been ignored when measuring the net effect of tax compliance on business taxpayers because it was believed that the measurement of such benefits was impossible or difficult. This paper first discusses the theoretical issues surrounding the valuation of managerial benefits, including the related tax/ accounting costs overlap problem; it then proposes a fresh approach for measuring managerial benefits. The proposed measurement model incorporates a subjective evaluation of useful accounting information by owner‑managers and objective measurements of accounting costs. Two main components of managerial benefits are identified: the incremental value of managerial accounting information and the savings on reporting costs. A study of small businesses conducted in late 2006, compared accounting practices between tax complying entities (TCEs) and tax compliance free entities (TFEs) and investigated how accounting information was valued by owner-managers in TCEs. The research adopted a mixed methodological design including a major quantitative phase followed by a minor qualitative phase. The results show that while a vast majority of TFEs maintained basic accounting functions, record keeping requirements imposed by tax compliance led to the implementation of more sophisticated accounting systems in TCEs. It was also found that TCE owner-managers assigned a relatively significant value to the managerial accounting information that is generated as a result of record keeping imposed by tax compliance, suggesting that substantial managerial benefits might be derived.

Item Details

Item Type:Refereed Article
Research Division:Commerce, Management, Tourism and Services
Research Group:Banking, finance and investment
Research Field:Finance
Objective Division:Economic Framework
Objective Group:Management and productivity
Objective Field:Industrial relations
ID Code:83046
Year Published:2009
Deposited By:Accounting and Corporate Governance
Deposited On:2013-02-27
Last Modified:2013-06-27

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